Boost your retirement savings – whatever your age

SPONSORED: Worried that you won’t be able to retire comfortably? There are several ways you can increase your savings. Here’s how.

The struggle to save money for retirement is well documented in South Africa – but there is hope.

Almost half of the respondents under 50 in the 2021 Old Mutual Savings and Investment Monitor say that their retirement plans have been affected by Covid-19. Also, one in three people overall do not have enough savings to last more than a month should they lose their income.

While it’s never too late to start saving for retirement, the sooner you begin and the longer you stay invested, the more you’ll benefit from the value of compounding interest.

If you’re worried that you won’t have enough money to retire comfortably, it may be reassuring to know that there are ways in which you can boost your retirement savings.

Here are a few:

1. Set a retirement goal and budget

When you have a plan in place to support your retirement goals as well as someone who holds you accountable, it’s much easier to stay on track. It’s impossible to plan for all future eventualities but by thinking ahead, you can best prepare for your retirement savings journey and commit to a regular retirement contribution that fits in with your financial responsibilities.

2. Open a tax-efficient investment account

If you are a member of a pension or provident fund, you will already be making regular contributions towards your retirement. If you aren’t, then a retirement annuity (RA) is a good tax-efficient option that allows you to choose your investment funds within the limits set out by the retirement fund regulator. You can also use a RA to top up your existing contributions. If your budget allows it, you can set up an RA for your children, thereby helping them benefit from compounding interest from an early age.

3. Factor in job changes and salary increases

Once you get into a regular savings rhythm, it’s vital to keep on top of your monthly spending by sticking to your budget. If you are fortunate enough to receive regular salary increases each year, be sure to factor this into your retirement plan by increasing your retirement contributions by the same percentage.

Should you resign from your job or be retrenched, speak to your financial adviser about preserving the savings from your pension or provident fund as opposed to cashing them in. A preservation fund is an investment vehicle that allows you to keep all your savings untouched, and you won’t be taxed when you transfer from your employer’s fund into the preservation fund. Instead, your money continues to grow tax-free until you retire and start drawing funds from it.

4. Find yourself an accredited financial adviser

Just as an athlete has a coach to help them to perform optimally, you can get yourself a financial coach. Financial advisers follow stringent industry rules and regulations, and they have the know-how to help you achieve your financial goals. An accredited financial adviser will sit with you and do the following:

• get an understanding of who you are, what drives you and what your goals are;
• get a view of what you have in place already, and a view of what gaps you have in your plan to get you to your goals;
• understand your financial status – a good adviser will know what your needs are and build a plan that aligns with what you can afford and your lifestyle;
• create a financial plan that suits you and your family’s needs;
• work with you in implementing and tracking the plan; and
• have at least one annual meeting with you to review your financial plan. 

5. Get a side hustle

Another good way to boost your retirement savings and help you achieve your retirement goals more quickly, is to build a business that you can run flexibly in addition to your full-time job. OMSIM research shows that many South Africans are already doing this by learning a new skill at home, and almost half have more than one source of income.

6. Stay the course

Saving for retirement should be a priority, but it can be hard when life gets in the way. When this happens, it’s important to try to stay invested. Speak to your adviser about the options available to you should your ability to afford your premiums be affected. Regular reviews of your retirement plan with a trusted and accredited financial adviser should give you the guidance and reassurance you need to stick with it.

If you’d like to get a head start on your retirement savings, speak to your financial adviser, call 0860 60 60 60 or click here.

Disclaimer:

The material is not intended as and does not constitute financial or any other advice. The material does not take into account your personal financial circumstances.

For this reason, it is recommended that you speak to an accredited broker or financial adviser to consider all your options and draw up a plan to achieve your financial goals.